Nokia reported second quarter 2026 results on July 23 that beat earnings estimates, driven by a sharp rise in demand from AI and cloud customers within its Network Infrastructure segment. Net sales grew 9% year over year at constant currency, while both gross margin and operating margin expanded by 70 basis points.
The results mark a continuation of the strategy Nokia laid out at its Capital Markets Day, with CEO Justin Hotard pointing to what he called the company's opportunity in the AI super cycle as the driving force behind the quarter's momentum.
Headline Financial Results
Nokia's comparable operating profit rose to €434 million for the quarter, with gross margin reaching 46%. Comparable earnings per share came in at €0.07, beating the Zacks Consensus Estimate of seven cents.
Reported net income told a more complicated story. The company posted net income of just €5 million, or €0.00 per share, down from €96 million in the same quarter last year. The decline reflects accelerated restructuring charges that weighed on reported profit even as underlying, comparable performance improved.
Key Figures From the Quarter
- Net sales grew 9% year over year at constant currency.
- Comparable operating profit reached €434 million, up from €252 million a year earlier.
- Gross margin expanded to 46%, a 70 basis point improvement.
- Operating margin rose to 9%, also up 70 basis points.
- AI and cloud customer sales more than doubled year over year to €446 million.
- Order intake from AI and cloud customers reached €2.8 billion.
What Drove the Growth
The clearest growth driver this quarter came from Nokia's Network Infrastructure segment, particularly its Optical Networks and IP Networks businesses. Both benefited from rising demand tied to AI data center buildouts and hyperscaler investment in networking capacity.
Management was candid about the nature of this demand. Order intake of €2.8 billion from AI and cloud customers is significant, but executives cautioned that these orders tend to be lumpy, meaning revenue recognition is uneven from quarter to quarter. Roughly half of that order backlog is expected to convert into revenue within the next 12 months.
Strategic Investments Behind the Numbers
Nokia used the earnings call to highlight infrastructure investments tied directly to this AI-driven demand. The company launched its first commercial AI-RAN platform, with commercial availability targeted for 2027 and pilot deployments expected by the end of 2026.
To support growing optical demand, Nokia is expanding manufacturing capacity, including:
- Indium Phosphide semiconductor manufacturing in San Jose.
- Additional manufacturing capacity in Pennsylvania.
- A newly acquired manufacturing site in Arizona.
Restructuring and Portfolio Changes
Nokia remains on track to complete its 2023 to 2026 restructuring program by the end of this year, targeting €1.2 billion in gross cost savings. The company said it expects to recognize approximately €350 million in planned one-time charges tied to this program, which explains part of the gap between reported and comparable profit this quarter.
The company is also continuing to reshape its portfolio around areas where it believes it can differentiate. Nokia has agreed to sell its Fixed Wireless Access business to Inseego, a move consistent with its stated focus on AI and cloud-related networking rather than broader legacy product lines.
Separately, Nokia is accelerating the integration of its Chinese operations into its global operating model, following its move to take full ownership of that business at the end of 2025.
Outlook for the Rest of 2026
Nokia maintained its full-year outlook following the results, and executives said they now expect to deliver above the midpoint of their operating profit guidance range for the year. That said, the company flagged near-term softness ahead.
Management indicated that third-quarter mobile margins are expected to dip before improving again later in the year, and operating profit for the third quarter is expected to be sequentially similar to the second quarter rather than showing further sequential growth.
Why This Matters for Markets
Nokia's results add to a broader pattern among networking and telecom equipment companies benefiting from AI infrastructure buildout. The doubling of AI and cloud related sales suggests this demand is becoming a meaningful growth pillar rather than a one-off contributor, though the lumpy nature of large infrastructure orders means investors should expect uneven quarter-to-quarter revenue recognition even as the underlying trend remains positive.
For an equipment maker like Nokia, sustained hyperscaler investment in optical and IP networking capacity represents a structural tailwind, provided that capital spending from major cloud and AI infrastructure providers continues at its current pace.